Fifth Third Bank has reached a settlement to pay millions for allegedly forcing auto loan customers to purchase duplicative car insurance policies, resulting in increased monthly payments and repossession of vehicles from customers unable to afford these additional charges. The Consumer Financial Protection Bureau found that the Ohio-based bank wrongly applied around 37,000 insurance policies between 2011 and 2019, leading to a $5 million penalty and mandated redress for impacted customers. CFPB Director Rohit Chopra criticized the bank for burdening families with excessive charges, causing over 1,000 repossessions due to these practices.
In response to the allegations, Fifth Third Bank stated that the targeted auto insurance practices had ceased voluntarily in 2019, prior to the CFPB investigation. The bank’s chief legal officer, Susan Zaunbrecher, emphasized that corrective measures had been taken to rectify these past issues and address any identified problems promptly. This settlement is not the first regulatory action faced by the bank, as in 2020, it agreed to pay $15 million for improperly opening accounts between 2010 and 2016, demonstrating a pattern of compliance concerns.
The bank’s auto loans included a ‘collateral protection insurance’ provision that allowed for force-placed insurance when customers lacked their coverage, as described by the CFPB. However, over half of these policies were reportedly applied to individuals who already had insurance or secured new coverage shortly after lapses in the previous policy. The CFPB alleged that these insurance policies carried higher premiums, significantly inflating borrowers’ monthly payments and causing financial strain that resulted in delinquencies and vehicle repossessions for hundreds of customers.
